New York, NY — Skills shortages and worklessness are treated as mutually exclusive problems. New research from the Community Impact Institute finds that they share a common cause, a skills system that has not yet fully adapted to the pace and demands of the modern economy.

The new report,  “Tools for the Job? Closing Britain’s Skills Divide Through a More Agile System”, examines why employers in technical sectors continue to struggle to recruit while 981,000 young people are not in education, employment, or training and 2.8 million people are out of work because of long-term sickness. It finds that the roles going unfilled are largely ones that people out of work could be trained to do, and that the constraint lies less with those people than with the system around them.

The report is authored by Victoria Aarons, Deputy Director, and Ania Mendrek, Senior Fellow of the Community Impact Institute, and is part of the Institute’s Spotlight: Breaking Britain’s Barriers research series examining the causes of economic inactivity and what can reconnect people to opportunity.

Britain’s labor market is undergoing rapid transformation . The transition to net zero, the broad use artificial intelligence, and an ageing workforce are reshaping what work is available and what skills it requires. Hiring has slowed to its weakest level outside the pandemic in over a decade, yet skills shortages remain above pre-pandemic levels. The report finds that skills provision, education, and employment support are not integrated, and that each is planned at a fixed point in time and adjusted only after the fact.  

The report finds an opportunity to better align skills provision, education, and employment support so they can respond more dynamically to changing employer demand and labour market needs. For example, funding, planning, and employer engagement are not yet fully aligned with changing labour market demand. Further education funding largely follows past recruitment, skills planning is often national while barriers are local, and employers have too limited a role in shaping provision even as their investment in training has fallen by nearly a third since 2011.

The paper examines these patterns through a practice-based case study of The Verdancy Group and its training arm, Apex Training, in Hamilton and Basingstoke. Their model shows how green skills training can be built around employer demand, delivered locally within a national program and opened to people entering the sector for the first time. Learners referred through Restart train alongside employed workers towards the qualifications firms must hold to win work. At £3,750 per participant, each job entry returns an estimated £8,600 a year to the public purse in benefits saved and tax paid.

The report recommends six reforms to make the existing skills system more responsive, including funding tied to projected demand, flexible technical pathways, stronger local coordination, deeper employer involvement, support for progression and reskilling, and specialist locally rooted provision. Its central conclusion is that Britain does not need a new system, but a more agile one.

The full report is part of Spotlight: Breaking Britain’s Barriers, the Fedcap Community Impact Institute’s research-in-real-time examination of economic inactivity across the United Kingdom.

Visit Spotlight: Breaking Britain’s Barriers here. Be part of the conversation at #BreakingBritainsBarriers.